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Erie Indemnity Company (ERIE) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Erie Indemnity Company (ERIE)

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Intrinsic Value (DCF)

Current$282.30
→
Intrinsic$265.19
-6%
$182.64$265.19$422.05
Market implies 15% growth for 5 years
ERIE appears fairly valued — current price aligns with our DCF estimate.
At $282, the market prices in continued high-teens cash flow growth (15%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $183 → Bull $422. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →10%12%14%16%
8%$318$345$374$406
10%$226$245$265$287
12%$176$190$205$221
14%$144$155$166$179

Bull Case

  • Bull case ($422) offers 50% upside at 16% growth, 9% discount
  • Conservative 14% growth assumption is achievable based on track record

Bear Case

  • Bear case ($183) implies 35% downside at 11% growth, 12% discount
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5-Year Net Income Projection

Year 1$682.17M
Year 2$775.18M
Year 3$880.88M
Year 4$1.00B
Year 5$1.14B
Terminal$16.74B

📐 Model Inputs

Growth Rate13.6%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Net Income$600.31MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. Uses Net Income (FCF not meaningful for insurers). See FAQ below for full methodology.

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Frequently Asked Questions

Is ERIE stock undervalued or overvalued?
🟡 FAIRLY VALUED

ERIE trades at $282.30, within 10% of our $265.19 intrinsic value estimate. At 10.0% WACC and 13.6% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $184.56 (bear) to $378.42 (bull).

What is ERIE's intrinsic value?

Using a 5-year DCF model: Base FCF of $600M, projected at 13.6% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-267M net debt and dividing by 0.05B shares: Bear $184.56 | Base $265.19 | Bull $378.42. Current price $282.30 implies -7% to base case.

How is ERIE's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 13.6% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($13.71B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 22.8x.